1. Field
The present disclosure relates to managing a credit balance in a debit account, and more particularly to conditional balance exhaustion and/or conversion of debit accounts under the control of another entity.
2. Description of Related Art
The market for pre-paid credit cards and debit cards has grown exponentially over the past decades. One of the most popular gifts is a store credit or Visa™, Mastercard™, or American Express™ branded pre-loaded credit card, which is linked to an issuer-controlled debit account. The debit account is provided with an initial fixed balance typically equal to, or related to, an initial purchase price for the card. Purchases may be made up to the remaining debit balance in the account, but are refused if the purchase exceeds the remaining balance. It is often difficult or inconvenient for non-issuers, including consumers and retailers, to determine the debit balance at any particular time. Consequently, after using the card for some purchase less than the initial debit balance, the remaining debit balance may sit unused and eventually be forgotten by the card holder.
Card issuers may endeavor to profit from these forgotten unused debit balances, to the detriment of the debit card holders. For example, a common business model among issuers of pre-paid credit cards is to charge some fee upon issuance, and to charge a maintenance fee billed against the unused balance and/or to forfeit any unused balance at the end of the card's term, all while enjoying the interest-free “float” on the balance. Similarly, the prevailing business model for store-only “gift” cards is to enjoy the “float” and void the balance after some period of time. Different jurisdictions have regulated and, in some cases, prohibited portions of this business model. Even where voiding the balance is prohibited and maintenance fees are prohibited, billions of dollars of value nonetheless are never used and, as a practical matter, are forfeited through such non-use.
Because of the disparity between regulations for prepaid credit cards and prepaid store gift cards, consumers are often met with the hard choice of giving a more broadly useful prepaid credit card, or giving a store gift card subject to fewer forfeiture risks.
The current regulatory regime in the United States varies by state and is subject to change. For example, as of 2010 in California, no expiration dates or fees are permitted except for a $1 monthly fee for reloadable cards with a balance of $5 or less when the card has been unused for 24 months. Further, any card with a cash value of $10 or less may be redeemed for cash. In comparison, as of 2010, Florida prohibited expiration dates or fees except for cards linked to bank accounts usable with multiple unaffiliated merchants. A federal law will prohibit expiration for 5 years, but permits fees after 12 months. To avoid unfavorable regulations, issuers of debit cards may set up subsidiaries in states whose laws are more favorable and then export the cards for use in states with regulations less favorable for the card issuer. For example, one issue of great concern to issuers is having unused balances fall under abandoned property law and escheat to the state. Issuers may avoid jurisdictions which do not permit the issuers to recapture at least a portion of abandoned debit balances.
Notwithstanding regulations on debit card issuer conduct regarding unused debit account balances, consumers and other non-issuers of debit accounts such as debit cards often experience difficulties in recovering unused credit balances that are under the control of an issuer that is unwilling or unable to refund the unused balance in a convenient manner. Technological solutions that do not depend on the cooperation of the debit account issuer to report or refund an unused debit balance are not presently available.